It is an often quoted truism that you are more likely to get divorced than to change your current account.
Whether or not that is true, these accounts are certainly ‘sticky’, with more than half of us keeping the same current account for over a decade.
Now, some account holders will have no choice but to switch. Both Tesco and M&S are closing their current account offers – M&S by the end of this month and Tesco on November 30.
James Andrews, senior personal finance editor at money.co.uk, says that although the decision is “frustrating”, these current account holders can find better options elsewhere, sometimes with perks for switching or a better rate on an overdraft.
‘Tesco isn’t the first high-street lender to remove products and services and they won’t be the last,’ he says. ‘Those choosing to switch bank accounts due to Tesco Bank’s decision can make a decent financial return from their move.’
Rachel Springall, financial expert at money data service Moneyfacts, says that using the Current Account Switch Service (CASS) can make the process simple.
‘The service transfers over any set up payments to a new account, such as direct debits or standing orders and it’s a free to use service, which should take place within seven working days,’ she explains.
If you have not changed banks for some time, however, you may not know what types of account are available or which type of account might suit you.
Rachel advises taking time to compare perks available, the criteria you must satisfy to get them, and also overdraft fees and credit interest to decide what is right for you.
Here are some of the top things to consider:
Some banks will pay you just to switch to them, and this can be attractive.
For example, at present, HSBC is offering £140 if you switch via MoneySupermarket or Money Saving Expert to its Advance account.
To get the perk, you must pay in £1,750 or more every month and move more than two direct debits across.
Virgin Money offers a £150 Experience Days gift card to those switching using the CASS to its M Plus Account.
These accounts have other benefits, such as over 2% credit interest on the first £1,000 in your account for the Virgin one, and fee-free spending and cash withdrawals overseas.
The HSBC one has a linked 1% savings account where you can put £250 maximum every month.
However, Rachel, at Moneyfacts, warns that these perks don’t make these the right accounts for everyone.
‘It’s important that care is taken when comparing offers and consumers would be wise not to get blindsided by an upfront perk, as it’s the overall package of a deal that must be weighed up before they commit to a new current account,’ she says.
‘The cost to borrow using an overdraft, as well as any other benefits, are worth comparing carefully before someone commits to moving their account.’
Switching your current account and your rights
The Current Account Switch Service covers 99% of all current accounts and gives you some comeback if a switch goes wrong – a rare occurrence.
You need to ask your new provider to switch the account, using the CASS service, and agree to the ‘Current Account Switch Agreement’ and the ‘Current Account Closure Instruction’, both provided by your bank or
You can choose and agree your switch date and it should take only seven working days. Once the switch has been made you are covered by the following guarantee.
- Your new bank will take care of moving all your payments going out (for example, your Direct Debits and standing orders) and those coming in (for example, your salary).
- If you have money in your old account, your new bank will transfer it to your new account on your switch date.
- Your new bank will arrange for payments accidentally made to your old account to be automatically redirected to your new account for three years at least. Your new bank will also contact the sender and give them your new account details.
- If there are any issues in making the switch, your new bank will contact you before your switch date.
- If anything goes wrong with the switch, as soon as your new bank is told, they will refund any interest (paid or lost) and charges made on either your old or new current accounts because of this failure
- If your switch does not go well and you are not compensated you can go to the Financial Ombudsman, in order for final redress.
If you typically have a lot of money in your current account, a product that pays in-credit interest could make you some cash.
Many current accounts pay no interest at all, while others pay very little, as they are mostly designed to hold day-to-day spending money, not long-term savings.
Nationwide’s FlexDirect account has 2% in-credit interest for up to £1,500 a year for the first year, dropping to 0.25% after that, while the two accounts mentioned above from HSBC and Virgin also have interest-paying options.
If your account is not often in credit, though, you are better off looking for accounts with a low overdraft rate and charges.
If you often end up in the red, choosing an account with as low an overdraft rate as possible is advisable. They are expressed in EAR (Equivalent Annual Rate) – a representative interest rate that shows the rate you would pay if you remained overdrawn on your current account for a year.
‘One of the best deals with a lower charge comes from Starling Bank at
15% EAR. In addition, First Direct currently has a £250 interest-free overdraft (thereafter charging 39.9% EAR,’ says Rachel, at Moneyfacts.
Case study: ‘Switching only took five working days’
‘I moved to Nationwide because while using my old bank’s app, there was always messages about the app being fixed due to technical issues and this always took place at such inconvenient times- mornings or late afternoons,’ says Desriee Asomuyide, founder of inclusive educational brand Little Omo.
‘The process of moving to Nationwide was very quick, I just needed to show proof of address etc and the card and all my details was sent within five working days.
‘The app is more user-friendly and you can find things easily – cancelling your card if it’s lost or stolen and searching transactions.
Travel abroad has been curtailed for some time now, but as the world opens up again, overseas spending charges will move back up the agenda.
Most of the biggest high-street banks charge each time a transaction is made abroad, so this could be costly.
Starling Bank, Virgin Money and Monzo all offer accounts that do not charge for ATM cash withdrawals or retail transactions, with the latter depending on how much is withdrawn to be free of fees.
In addition, for those only looking to go to Europe, Metro Bank also has a fee-free account.
Ease of technology
Most banks have an app nowadays, but some current account providers offer more functionality than others.
Banks like Starling and Monzo will give you spending notifications and insights to help you to budget, while Barclays’ app allows you to view your accounts with other banks on its app, which can also help you to plan.
Check also for the ability to freeze and unfreeze a debit card online, which saves you having to cancel it if you lose it but think you may find it later.
‘I was fed up with slow service from my high street bank’
Judy van Niekerk switched from high street bank to Starling last July after struggling to communicate with her bank during lockdown.
‘I was left raging so often and hanging on the phone for up to 60 minutes – on one occasion it was closer to 90 minutes, only to be cut off,’ she recalls. ‘This was taking too much out of my day.’
Judy, who runs trader support business Tribe of Traders, says she was feeling resentful about banks due to the poor support.
‘From opening the account to getting the bank card, switching to Starling was a dream,’ she says. ‘I can speak to someone online during business hours via their chat and I know I will get through in minutes to someone.
‘I have never actually physically seen or spoken to someone from Starling, but I have never ever felt so comfortable with a bank.
‘This is the first time ever I have had banking on my phone, as I was never confident of banking systems’ security, but I have no issue with the Starling App and I use it all the time.’
Lots of people think about going green with their investments, but it is easy to forget that your current account could do good or ill as well.
‘The cash we keep in a current account doesn’t just sit there until we decide to withdraw it. Banks and other financial providers use our money to make more money (usually for themselves) by investing it,’ says Lisa Stanley Mann, co-founder of responsible money site, Good With Money.
‘Unfortunately, this means that large chunks of our earnings are often funnelled into practices that are harmful to the environment such as fossil fuels, tobacco, oil, or arms production. “Green” banks avoid investing in environmentally harmful or otherwise unethical industries, and a minority – such as Triodos – go much further by investing your money to make a positive impact on the planet and society.’
The latest figures from the Current Account Switch Service for Q1 2021 show a number of the more sustainable and ethical current account providers are attracting increasing numbers of customers.
Starling Bank, Triodos and Nationwide, among others, all reported more people opening current accounts than closing them.
Starling Bank saw the largest net increase in new customers and Triodos lost only 77 customers, the fewest of all UK banks.
Good With Money’s top five ethical and sustainable current account providers are:
The Triodos account costs £3 a month, while the others are free. The Engage account is run through credit unions but is available online.
Students make the first switch
Opening a student account is a rite of passage for those heading off to university, which is why banks are competing so hard for students this year. The best perks available include:
- Annual subscription to online library Perlego, worth £96 a year, for free from Barclays
- £80 in cash plus the choice of a £20 Uber Eats voucher or a year of unlimited next-day delivery with ASOS Premier (worth £9.95 a year) from HSBC.
- A £35 a year tastecard for two-for-one meals and £50 cashback from Nat West
- £70 student railcard from Santander
- 5% credit interest from TSB
Students should also consider the interest-free overdrafts offered by the different banks, and how long they will last after graduation.
‘The most generous overdraft tariffs this year are with Nationwide Building Society, HSBC and Barclays, offering up to £3,000 interest-free,’ says Rachel, at Moneyfacts.
If you want more tips and tricks on saving money, as well as chat about cash and alerts on deals and discounts, join our Facebook Group, Money Pot.
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